As we previously noted, consumers have re-embraced coupons as a way to get more for their money.  In the third quarter, year-to-date coupon redemption was up 26 percent to 2.4 billion redemptions, making it the fourth consecutive quarter of growth, according to new research from Inmar in collaboration with The Nielsen Company.  During 2006-2008, coupon redemption stagnated at 2.6 billion each full year.  Inmar, which provides logistic management solutions to retailers, wholesalers and manufacturers in the consumer goods and healthcare markets, is forecasting that 3.2 billion coupons will be redeemed this year, marking a significant increase over recent years.

But while food coupons have typically driven activity, non-food coupons for general merchandise, household items and personal care drove growth in the third quarter, up 45 percent over the same period last year (food items were up 26 percent over the same period last year).  While supermarkets remain the traditional coupon redemption channel, representing 64 percent of redemptions, the dollar/discount/variety and mass merchandiser channels are up at a faster rate.

“It’s clear that coupons have increasingly become an important way for consumers to save some money when shopping.  Digital coupons are driving a huge increase in redemptions but still represent a small percentage of distributed and redeemed coupons.  Meanwhile, freestanding inserts account for almost 90 percent of distributed coupons, but just over half of redeemed coupons,” said Todd Hale, Senior Vice President, Consumer and Shopping Insights at Nielsen.  “Moreover, coupon enthusiasts buy more products per trip and generally have a higher spend per trip in the grocery and supercenter channels.  The fact is, coupons can yield a significant return on investment, and savvy consumer goods manufacturers should seriously consider how they may be able to play a role in driving sales.”

Trade promotions include products featured in ads and in-store circulars, products displayed on end of aisle caps or away from their normal self location and products with temporary price reductions.

“Although we shouldn’t be surprised by an increase in promoted sales during a recession, it’s stunning to see an additional 1.3 billion purchase decisions being influence by in-store promotions,” said Tom Pirovano, Director, Industry Insights at Nielsen.

Other key findings from Nielsen’s study:

• Chicagoans buy the most on promotion, with 55.9 percent of products sold on promotion, followed by Phoenix, Oahu and Indianapolis.
• San Antonio, Oklahoma City/Tulsa and Birmingham have the lowest promotion sales.
• Impulse purchases such as ice cream, crackers and carbonated beverages sell the most on promotion.
• Conversely, magazines, ice and tobacco sell the least on promotion.

In other promotional activity, Nielsen found that coupon activity – -which has seen a strong resurgence among American consumers over the last year – was highest is disposable diapers (21% of which were sold with a coupon), dough products (14%) and sanitary protection (12%).  By measuring the average number of units purchased per trip, Nielsen identified canned cat food, baby food and canned dog food as the best candidate for buy-one-get-one (BOGO) promotions. This same measure found that coffee makers, baking powder and dishwasher rinse aids are the weakest categories for BOGO promotions.

“The key for consumer product manufacturers is to set goals for each trade promotion, and then measure the results to determine which promo events are the most efficient and effective,” said Pirovano.  “Retailers who can drive their feature ads with the right mix of products, price points and display support will have success with both their vendors and shoppers.”

These changes present a range of challenges for retailers and consumer goods manufacturers, namely, how to adapt to the new environment and continue to grow while watching costs. 

“The industry is at an inflexion point — a time when new habits are being created — and the next 12 months holds both challenges and opportunities in the grocery channel,” said Chris Percy, Managing Director – Consumer Group, Nielsen Pacific.

Nielsen’s Special Report: Forces of Change explores the changes sweeping the Australian grocery channel. Pulling together a range of exclusive data, the report analyses how Australians are spending their money in a difficult economy, which product categories are showing growth and how marketers and manufacturers need to fully understand their customers, the changes taking place and how to reach their targets more effectively.   

Read Nielsen’s Special Report: Forces of Change, which appeared in the July 20-31 edition of Retail World.

At the same time, technology is having a measurable impact on retail sales.  In a recent U.S. study, Nielsen measured more than 200 digital ad campaigns and found the following:

• Average of 32% sales increase
• $1.1 million hike in short-term incremental sales
• 157% return on investment
• 18% boost in penetration
• 14% surge in buying rate

In addition to online ads, retailers are using scanning technology to enable consumers to check-out faster, create and retrieve shopping lists and even find and print recipes.  Read more about how technology is transforming both the retail environment and consumer shopping experience in the new edition of Consumer Insight.

Sales over Easter week benefited the out-of-town megastores, which rung up sales 22 percent over the same period last year.

“Over 20 percent growth is a welcome boost for retailers.  The better weather and later Easter drove shoppers out and got them spending not only on grocery, but also confectionary, snacks and alcohol,” said Mike Watkins, senior manager, retailer services at Nielsen.

Sainsbury benefited from strong in-store offers and prices cuts, drawing new shoppers and once again increasing its share to just under 15 percent.

Percent share of grocery market spend by retailer

Read the full press release here.

62 percent of Taiwan’s grocery shoppers claim to have become more price-sensitive, while among females over 35 and low income households, that number rises to 75 percent.  One store, Post Exchange, has capitalized on this trend with its low price strategy. As a result, 17 percent of all Taiwanese shoppers spend the majority of their grocery dollars at the chain.

Brand loyalty for some categories has suffered: more than 60 percent of consumers would buy an alternative brand of biscuit, snacks, shampoos and laundry detergents if their usual brands were out of stock.  That said, vitamins and face care products seem to engender the highest levels of brand loyalty, with high levels of consumers saying that they would wait until their brand was available or locate it at another retailer.

Read the full press release about Taiwanese consumer trends here.

“Shoppers are now well versed with money saving strategies, making the most of price cuts and promotions with many also opting for retailer own labels, where growth is almost 6 percent,” said Mike Watkins, Senior Manager, Retailer Services at Nielsen.

To further extend the buying reach of their pounds and pence, shoppers are:

• Continuing to reduce the number of times they shop for groceries, with the average number of visits falling at all major retailers (except the Co-op)
• Shopping around for the best values versus staying with their regular retailer
• Shopping for small amounts more often

“Morrisons, Asda and now Sainsbury have pulled away from Tesco in terms of sales growth and are all attracting new shoppers.  Once in store, picking and choosing the best bargains, combined with overall shopper caution, has caused the amount that the average shopper spent in supermarkets over the last quarter to be lower than it was a year ago, Asda and Morrisons being the only exceptions,” said Watkins.

Read the full press release about first quarter 2009 UK grocery sales here.

On a dollar volume basis, grocery stores continue to capture the highest percentage of consumer dollars, with 33.1 percent.  In Grand Rapids, Michigan, groceries capture almost 50 percent of the consumer spend, while in New Orleans grocery stores account for just over 20 percent.

Dollar Volume By Channel

Warehouse club stores are a major force in Western states, with the greatest percentage of consumer spend in San Francisco and Seattle.  In fact, of the top 10 markets for warehouse club store sales, nine are located in the west.  Meanwhile, warehouse clubs have the lowest percentage of share in Louisville and Columbus.  Across the U.S., drug stores capture about 3.8 percent of consumer spending, but in Cleveland, they make up almost 9 percent, while in Denver, they make up less than 2 percent.

Club stores skew to high-income households, while dollar stores, supercenters and drug stores attract a greater percentage of sales from lower income households.  Household has kids are more likely to spend their money at mass merchandisers, super centers and club stores.

The top three categories skewing to high income households are wine, diet aids and floral/gardening, while large households are buying disposable diapers, baby food and frozen juices and drinks. Seniors skew toward vitamins, medications/remedies and canned fruit, and households with teens skew towards sanitary protection, ethnic health and beauty products and gum.

In the last year, most channel penetration trends remained stable.  Supercenters saw the greatest increase, 2.4 percent on a year-to-year basis, while mass merchandisers saw the greatest decline, with a 2.9 percent loss. More interesting is a look at how channel trends have changed over the last 12 years:

Percent of U.S. Households Shopping: 2008 vs. 1997

“As consumers change their spending habits, both retailers and manufacturers are finding growth and profit opportunities by adapting their merchandising strategies to the changing retail landscape,” said Tom Pirovano, Director, Industry Insights at Nielsen.

Other subjects examined in Nielsen’s report were:

• Other channels (e.g., apparel stores, home improvement, electronics) and their average spend per trip
• Categories with the broadest appeal across demographics
• Categories with the highest buying rates and purchase frequencies
• Categories with the highest percentages sold with manufacturer coupons
• Food and beverage sales outside the traditional grocery channel

Across 114 categories representing more than 99 percent of all department sales Nielsen monitors, six categories had price increases of greater than 15 percent over a year ago.  38 categories had price increases of 0 percent to 4.9 percent, while 11 had price declines. The top five categories with the largest price increases over the course of the year:

• Dry vegetables & grains 25%
• Flour 23%
• Jams, jellies & spreads (including peanut butter) 19%
• Car accessories 19%
• Pet food 16%

Higher commodity prices played a role in all of the food categories, while higher crude oil prices drove increases for motor oil in the car accessory categories.  Meanwhile, the following categories decreased in price:

• Fresh eggs -12%
• Milk -8%
• Candles & Incense -5%
• Light bulbs and telephone accessories -3%
• Non-carbonated soft drinks -3%

In the four week period ended January 24, 2009, unit prices across the store were up 5.5 percent – exactly the same as the 2008 Consumer Price Index calculated by the U.S. government.

“U.S. consumers would certainly benefit from lower prices.  But retailers should be careful with how far they push their manufacturer partners to lower prices. If they simply push for lower prices without planning for the right lower prices, they may find it extremely difficult to grow same-store sales this year,” said Todd Hale, Senior Vice President, Consumer & Shopper Insights at Nielsen.

Read the entire article about pricing trends in the lastest edition of Facts, Figures & the Future here.

The participants were Todd Hale, Senior Vice President, Consumer & Shopper Insights, Nielsen U.S.; Jonathan Banks, Director, Retail Insights, Nielsen Europe; James Russo, Vice President of Marketing, Nielsen U.S., and; Jean-Jacques Vandenheede, Director, Retail Insights, Nielsen Europe.  Key themes were:

Consumers: It does not matter where consumers live – they share a common goal: to get the most for their money.  They are focused on value and are taking advantage of deals.  And they have re-focused on the essentials: “If you can’t eat it, you don’t need it.”  Higher incomes have not been immune: the shopping and spending habits of all income levels have been affected by the economy.

Retailers: As a result of this changed consumer behavior, food retailers are faring better than most others.  Private labels’ share is growing in many categories and in many countries, and offers an avenue of growth for many retailers.  In the U.S., Kroger has gone head-to-head with Walmart with matching prices on food basics.  Supercenters and dollar stores are also benefiting from the shift in consumer behavior.

Consumer product manufacturers: Brand development and innovation are more important than ever: “History tells us that really great brands have been launched in the middle of recessions where advertising can cost less.”  Manufacturers are struggling with determining the duration of the recession and how to plan for recovery. Opportunities will be found by aligning with evolving consumer behaviors such as fulfilling basic over discretionary needs, trading down and a focus on value.

Looking Ahead: Caution and uncertainty are the operable words.  Now is the time to plan ahead and develop an exit strategy out of a crisis. The biggest opportunities will be found by aligning with the deepening consumer behaviors that have been occurring since the beginning of 2008.  As the economy slows, these behaviors will intensify.

Read the whole discussion in the February issue of Consumer Insights.